AT&T to acquire T-Mobile for $39 billion

AT&T has announced a definitive agreement to buy Deutsche Telekom's American T-Mobile subsidiary in a cash and stock deal worth about $39 billion, and giving the German carrier an 8 percent stake in AT&T.

The two companies issued a press release outlining the terms of the deal, which has been approved by the board of both carriers.

T-Mobile and AT&T share similar GSM and UMTS/HSPA networks, and both are working to build new next generation networks using HSPA+ and LTE. However, obtaining the rights to radio spectrum and building out these networks is both expensive and complex.

AT&T's chief executive Randall Stephenson said the deal "provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies ability to meet the ongoing explosive demand for mobile broadband."

More in common with AT&T than Sprint

T-Mobile had been rumored to be entering talks with Sprint, but those two companies run incomparable networks and have diverging future plans, as Sprint operates both CDMA and iDEN (from its merger with Nextel, which it plans to phase out) networks and has begun building a next generation WiMAX network with Clearwire (WiMAX competes with LTE as a next generation mobile network technology).

Germany's Deutsche Telekom chief executive René Obermann noted that "After evaluating strategic options for T-Mobile USA, I am confident that AT&T is the best partner for our customers, shareholders and the mobile broadband ecosystem. Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices. Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the U.S. market."

Benefits for AT&T users

The release said that AT&T and T-Mobile USA customers "will see service improvements - including improved voice quality - as a result of additional spectrum, increased cell tower density and broader network infrastructure," noting that as soon as the deal closes, AT&T "will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction, and double that in some markets."

Absorbing T-Mobile "will increase AT&Ts network density by approximately 30 percent in some of its most populated areas, while avoiding the need to construct additional cell towers. This transaction will increase spectrum efficiency to increase capacity and output, which not only improves service, but is also the best way to ensure competitive prices and services in a market where demand is extremely high and spectrum is in short supply," the release says.

By bolstering its existing GSM, UMTS and HSPA+ networks, AT&T will be able to better focus on future LTE capacity, rather than struggling to get its existing network to meet today's demand. While T-Mobile operates its 3G UMTS network on different frequencies than AT&T, its basic 2G GSM network is identical. AT&T can also use the networks and towers T-Mobile operates to strengthen its own.

T-Mobile adds 33.7 million subscribers to AT&T's network of of about 95.5 million, creating a total of about 130 million users, and becoming the largest American carrier. The deal will also expand Apple's iPhone to three of what were the top four US carriers, as Apple has already brought it to Verizon earlier this year.

So AT&T will be the only nation wide GSM provider in the US? That doesn't sound good.

Oh god... at first glance I read the headline as APPLE buys Tmobile, which would have been the worst idea EVER.

Well, yes ATT will the only nationwide GSM provider. But they didn't compete anyway, so what's the point of having two? Hopefully this will provide regulators with a chance to do what they are supposed to do - ensure that ATT is forced to provide decent wholesale access to outsiders. Also they could impose rules to force changes in contract structures, or, best of all, force ATT to offer cheaper plans to those who are not using a phone on subsidy.

I can't believe this! Hopefully the government stops this from happening or at least makes AT&T divest in a lot of markets. There's only a handful of GSM carriers nationwide and with there being just one nationwide provider we're in for some anti-competitive moves by AT&T (I hope not though).

poor verizon...
what's betting that they buy sprint just so they can keep saying they are the largest cellular network?
Whatever. Seriously concidering ATT now that they will (hopefully) have decent NY service.

I was a T-Mobile customer for years and as JDPowers and others confirmed many times, they had the best customer service by far of any US carrier. And they generally had the most innovative, consumer friendly rate plans. Too bad that wasn't enough to overcome their spectrum limitations. I'll be sorry to see them go.

Speaking of which, who will buy that 1700mhz band they own? Apple never showed any interest in accommodating it.

And this provides a very good lesson for those who thought Apple was saving up their $60 billion in cash to make a big purchase. This purchase cost ATT exactly FIVE billion of cash. The rest of the $25 billion cash was financed. As it would be in any deal Apple might make.